Baidu Company Update
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Baidu is China’s leading search engine. Although its stock price has been hit by Beijing’s regulatory authorities against technology groups, it has raised $1 billion through the issuance of a large number of oversubscribed bonds due to strong investor interest.
According to the two bankers involved in the transaction, the debt sale attracted between US$5 billion and US$6 billion in orders.
At the time of the US dollar bond issuance, the Chinese authorities are conducting a comprehensive 10-month campaign Targeting the largest technology company in the countryBaidu’s share price has fallen by a third this year, and Alibaba’s Hong Kong-listed share price fell to its lowest level since the e-commerce group’s second listing in Hong Kong in 2019.
But Baidu’s first environmental, social and governance bond attracted strong demand because despite stricter regulatory review, investors seemed confident in the technology group’s ability to repay its debt.
“We have raised a lot of questions about the impact of regulatory announcements and regulatory uncertainty, which is undoubtedly a top priority for many investors,” said a banker involved in the transaction. “But Baidu’s credit strength overwhelms these concerns.”
“This is a positive sign [for Chinese tech] But you can’t take it out of context,” the banker added.
Baidu, which dominates online searches in China, price 5.5-year and 10-year sustainable bonds at 1.625% and 2.375%, respectively. According to the terms seen by the Financial Times, this is about 0.83 and 1.13 percentage points higher than that of US Treasury bonds of the same maturity.
Bankers stated that the final price was far below initial expectations, and both interest rates were more than 0.3 percentage points lower than the initial guidance. Baidu received a quota of up to US$1 billion in bonds from Beijing this month.
“Given the regulatory noise, this is an interesting timing,” said a debt financing banker. “But regulatory discussions are all about Life structure, Data privacy and antitrust, which will affect the growth prospects of these companies, not their potential reputation. ”
He said that U.S., global or regional investors who bought the bond had “almost no hesitation.”
Although China’s largest technology group warned that Beijing may conduct further scrutiny. Andy Lau, President of China Internet Group Tencent, Tell investors on Wednesday This pressure “will come from all the different regulators… We think there will be many [new measures] come out”.
However, the head of fixed income at a European bank said that the positive response from Baidu’s bond sale has laid the foundation for more large-scale issuances by Chinese technology groups whose stock prices have been hit in recent months.
Dealogic’s data shows that Chinese entities have raised USD 123 billion in debt this year, compared with USD 127 billion in the same period in 2020.
“If they decide to press the button and [tap global bond markets] I’m sure they will get the support of investors, no doubt,” the banker said.
Goldman Sachs, Bank of America, JPMorgan Chase and CICC acted as joint bookrunners for the transaction.